Unformatted text preview: when it doesn’t meet the minimum but 5% is better than no %! EXAMPLE: Macon has sales of $5,000,000 and expenses of $1,500,000. His beginning operating assets were $10,000,000 and his ending operating assets were $14,000,000. He requires 25% on all investments. How would you judge his performance based on ROI? o Residual Income (income that we “make” above and beyond the minimum required return) = Net Income – (Average Assets X RRR) General Rule says that if RI is zero or positive you should accept because you are making your minimum required rate and then some! EXAMPLE: same information as example above. Chapter 10 Examples...
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- Spring '10
- Financial Accounting, Investment Centers, Minimum ROI, Turnover Profit Margin